Annuity

Annuity, a term signifying in its general sense any fixed sum of money which is payable yearly or in given portions at stated periods of the year. It may be determinable on the occurrence of a particular event, as the death of the grantor or grantee, or it may be perpetual or for a term of years. An annuity is usually created by the present payment of a certain sum as a consideration, and the rules and principles by which to estimate its value have been the subject of careful investigation. The present value of a perpetual annuity is a sum that will yield an interest equal to the annuity and payable at the same periods, and an annuity of this kind, payable quarterly, will be of greater value than one of like amount payable annually, because the annuitant has the advantage of interest on the quarterly payments.

The simple term annuity is commonly understood to mean a life annuity. The holder of an annuity of any kind is termed an "annuitant." The value of a life annuity depends upon the manner in which it is presumed a large number of persons similarly situated with the proposed annuitant would die off successively. Various tables of these "decrements of life," as they are called, have been constructed from observations made among different classes of lives. Some make the mortality greater than others, and, of course, tables which give a large mortality give the value of the annuity smaller than those which suppose men to live longer. Those who buy annuities would therefore be glad to be rated according to tables of high mortality, or low expectation of life, while those who sell them would prefer receiving the price indicated by tables which give a lower rate of mortality.

In assurances the reverse is the case; the shorter the time which a man is supposed to live the more must he pay the office, that the latter may at his death have accumulated enough to pay his executors. Under the old Annuity Acts deeds granting annuities for lives by way of the repayment of money lent required to be enrolled in Chancery, but now, under the statute of 1854 and 1855, they require to be merely registered with the Registrar of Judgments at the central office of the Courts of Justice. Annuities or rent charges given by will are excepted from the operation of this Act. Annuities may also be regarded as legacies payable, not in mass at one time, but by instalments every year, or aliquot part of a year, therefore the word legacies in general comprises annuities.

The value of an annuity on the longest of two lives, that is which is to be payable as long as either of the two shall be alive to receive it, is found by adding together the values of the annuity on the two lives separately considered, and subtracting the value of the annuity on the joint lives. For the above species of annuity puts the office and the parties in precisely the same situation as if an annuity were granted to each party separately, but on condition that one of the annuities should be returned to the office so long as both were alive, that is, during their joint lives. The value of an annuity which is not to be payable till either one or other of two persons is dead, and which is to continue during the life of the survivor, is found as in the last case, only subtracting twice the value of the joint annuity instead of that value itself. Consequently the value in this case is less than in the last, by the value of an annuity on the joint lives.

Sometimes an annuity is payable only out of income, and sometimes it is a charge on the corpus itself of the estate, in which latter case the annuitant may, if the income is insufficient, require a sale of a sufficient part of the corpus, and will even be entitled to a prospective order for the necessary successive future sales. An indefinite trust to receive rents for payment of an annuity is a charge of the annuity upon the corpus, and a direction to purchase an annuity for A entitles A to have the purchase money paid over to him or her, although the testator may have directed the contrary; and if the intended annuitant be dead his personal representatives will be entitled to the purchase money although the purchase money is to consist of the proceeds of land sold.